Tony Muna, CUC executive director, said since the corporation signed its new fuel supply contract agreement with Mobil, it has paid the fuel supplier close to $80 million in cash.
He said this “good faith” effort to meet Mobil’s cash-payment demand should encourage the oil company to ease restrictions on future fuel deliveries as the islands continue to suffer from an economic crisis.
“Since inception of the current fuel contract on 1 May 2007, CUC has purchased in cash almost $80 million worth of fuel; $50.15 million alone since Oct. 2007. CUC and the CNMI government have demonstrated good faith in meeting fuel purchase payments under current cash terms,” Muna said in a letter to Brian Bamba, Mobil’s commercial manager.
“Please consider CUC’s request for credit term of 60 days EOM (end of the month). Our contract with Mobil provides CUC the only venue to achieve working capital stability immediately,” he added.
The CUC executive director said because fuel prices continue to soar in the international market, the agency cannot cope with its expenses despite raising the power rates.
From February to May this year, Muna said they paid 29.42 percent more for fuel.
Before, Muna said, a 47,421 barrels of diesel fuel cost $5.8 million. By May, the same was priced at $7.7 million — up by $1.9 million compared to previous months.
Muna said CUC was forced to tap into its non-fuel charge collections to come up with the difference and ensure that the government power plants have fuel to provide electricity needed by CNMI residents.
“Considering CUC’s monthly revenue stream which represents collection on billings issued two months prior for which fuel charges billed in March is collected in May, CUC is addressing a $7.7 million fuel bill in May with a fuel charge recovery revenue stream that is at most $6.01 million. CUC is forced to use $1.6 million of non-fuel charge collections to address the increase in fuel costs,” he said.
He told Bamba that CUC’s 60-day credit term is mutually beneficial for Mobil and the CNMI government.
It will help stabilize CUC’s working capital and Mobil will see “recurring purchase of fuel supply,” he said.
CUC has three power plants on Saipan and one each on Tinian and Rota.
Every month, Saipan plants consume 1.679 million of gallons of fuel to produce electricity.
The privately run Tinian power plant needs 207,430 gallons of fuel while that on Rota consumes 66,516 gallons.
Imported fuel sent to Tinian and Rota costs more due to shipping costs and additional charges.
Blackouts continue to inconvenience residents on Saipan as a two-hour load shedding schedule is still observed daily.
